MSE401 FINAL PRESENTATION:

SYNERGY & RESOURCE/BUDGET

ALLOCATION

Presented by Group 5:Matthew ShpolyanskiHovig KeushkerianAbdullah AlkhiliwiAbdulaziz Alassaf

What is Synergy? The word synergy is derived from

the Greek word “synergos”, which means “working together”

Synergy refers to the ability of two or more units or companies to generate greater value together than they could working apart.

Abdullah Alkhiliwi

Synergy in Everyday Business We’ve found that most business

synergies take one of six forms :1. Shared Known-How2. Coordinated Strategies 3. Shared Tangible Resources 4. Vertical Integration5. Pooled Negotiating Power 6. Combined Business Creation

Abdullah Alkhiliwi

Case Study:The Synergy Tower:

Merging Advanced Workplace Strategy with High Rise Design

Synergy is being integrated in architectural design

Designers see direct correlation between floor plan and facilitation of synergy

Floor plan actually encourages workers to mingle with one another Open spaces allow quickly shifting between work

modes

Hovig Keushkerian

Concept of synergy in the workplace is beginning to be incorporated into the planning stage of a business model.

Enhanced by advent of cloud computing

All possible avenues of communication are being incorporated into future floor plansEffective, flexible, and agile

communication is key to having synergy among workers.

Case Study:The Synergy Tower:

Merging Advanced Workplace Strategy with High Rise Design

Hovig Keushkerian

Synergy in the Workplace One of the difficulties that firms are

facing is internal conflict between departments and business units.

The sales and the credit departments rank high in these internal conflicts

Abdullah Alkhiliwi

A business organization can be compared to the human body. If one function of the body fails due to

some injury, the entire body might suffer.

When people work in teams their work is distributedBetter results are experienced in both

short and long time period

Synergy in the Workplace (Cont’d)

Abdullah Alkhiliwi

Synergy in the Workplace (Cont’d)

CEO Upper-MGMT

Lower-MGMT

Team leaders Workers

In sales oriented organizations where goals are allocated and teams are formed, a level of synergy should be maintained between all employees. • All of them have to work together

in order to achieve the desired target.

Abdullah Alkhiliwi

Budget/Resource Allocation: Managing Risk

Risk management is an essential attribute of the work in all financial markets.

It is impossible to stay on the market without good money management. because it is important to reduce risks on each deal for successful trading. This will help not only to save the own

money, but also to increase their quantity in several times.

Abdulaziz Alassaf

Managing Risk (Cont’d) The art of getting and increasing income

(gain, profit) in the uncertain economic situation are focused at the core of risk management.

Risk management is a system of management which covers economic and financial relations arising in the process of the governance.

Risk management includes the strategy and tactics of control, while it also greatly influences on budgeting and resource allocation.

Abdulaziz Alassaf

Managing Risk (Cont’d) In risk management, receipt of sufficient

and reliable data in terms of existing situation plays a major role, as it allows managers to take a concrete decision on the actions at risk.Risk is an integral part of activity in any

company. That is why one of the key conditions of

an effective budgeting system is its global use in conjunction with the elements and procedures of risk management.

Abdulaziz Alassaf

Managing Risk (Cont’d) As an application tool, budgeting is

intended to provide more effective financial and economic activities through the adaptation and optimization of management processes.

Risk management starts with the identification and evaluation of all possible threats that the company faces in its activities.The key point is the definition of limiting

external factors which include market size, scope of supply, consumer behavior and demand in budgeting.

Abdulaziz Alassaf

Allocating: Planning Planning

provides a way of identifying specific objectives and analyzing all the alternatives ways and methods of facing projects.

Most important part of resource and budget allocation

Without a sufficient plan, the risk of wasting money and materials increases highly○ Not only are money and materials wasted but

also time (time value of money is the most important part of engineering economics).

Matthew Shpolyanski

Allocating: Forecasting Forecasting

a scientific approach where a company would take its systematic data and choose whether or not to make a decision based on that data.

6 Elements of a good forecast : Timely, Reliable, Accurate, Meaningful, Written, and Easy to use

Used to: estimate costs/profits, pricing, cash flows, funding, new products, services

Matthew Shpolyanski

Allocating: Forecasting (Cont’d)

Exploratory Forecasting Taking data that occurred

and manipulating it to make it a formula/equation to make a logical decision.

Less risker technique to use than normative forecasting

Normative Forecasting The technique of “shooting”

ahead of time, envisioning a product that will most likely be successful and go back to present time

Only invest if pay-off will be high

Quantitative forecasting helps create mathematical formulas to help companies see how much they will most likely spend and keep track of any trends, cycles, or seasonal variations if there are any.

Matthew Shpolyanski

Strategies of Allocation Another technique of efficiently

allocating money and materials is by applying the company’s MARR into alternative methods/scenarios.

There are many mathematical techniques like present worth analysis, annual worth analysis, and rate of return analysis to help a company estimate how much they would need to spend or invest.

Matthew Shpolyanski

Budget and Resource Allocation Case Study: The Failure of Zune• An example of the

consequences of poorly allocating money and resources is Microsoft’s Zune.

• Instead of being innovative or inventive, Microsoft decided to “reinvent the wheel” by creating a media player very similar to the IPod

• With poor planning and forecasting, Microsoft didn’t realize the consequences of running against Apple’s IPod

2007 Survey done by the Wall Street Journal

Matthew Shpolyanski

Controlling Strategies of Allocation Controlling is a managerial tool which, if

applied correctly, tells all levels of management the efficiency, quality, and value of a particular aspect of the business organization.

In regards to resource and budget allocation, controlling can be broken down into four distinct phases:I. Establishing a MARRII. Measuring PerformanceIII. Evaluating the ProcessIV. Maintaining the Effective Process

Hovig Keushkerian

I. Establishing a MARR When allocating resources to processes

in an organization, a Minimum Attractive Rate of Return (MARR) must first be established. The MARR is a figure which is calculated by

planning, forecasting, and risk management components of decision making according to each process in an organization.

MARR gives management a benchmark to which it can compare the real return on its investments.

Hovig Keushkerian

II. Measuring Performance Success cannot be determined

unless it is measured.Achieved by excessive documentation

controlShowing the rates of return on

investments in processes○ Financial Ratios○ Financial Statements

Hovig Keushkerian

III. Evaluating the Process Data must be evaluated in order to

tell management how effective they were in the allocation of resources and budgets

Methods of EvaluationAuditsChecks and BalancesValidation of BooksLedger Control

Hovig Keushkerian

IV. Maintaining the Effective Process Most difficult step of Controlling

find a better strategy to allocate resources vs. trying to use a particular strategy constantly

Uncertainty and Dynamic Nature of Work means strategies must change as well

Managers must be vigilant in the pursuit of newer and better solutions to ensure some sense of continuity

Hovig Keushkerian

Conclusion Synergy and Strategies of Resource Allocation

can be intertwined.Allocation Strategies cannot be employed effectively if

there is no Synergy Resource Allocation Strategies cannot be effective if

they are not derived from data that is Proposed by Methods of ForecastingOrganized by PlanningEvaluated by Risk ManagementMeasured and Maintained by ControllingMinimizes Input while maximizing output of production

processes

Abdulaziz Alassaf

Q&AQuestions?Comments?Concerns?